Franchisee vs. Company-owned outlets

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Franchisees

A majority of fast food chains uses two types of establishments: franchisees and company owned outlets (Bradach, 1997). The proportion of these two establishments in a fast food chain will have an impact on allocation of authority, power (Furquim De Azevedo, 2010), innovation process (Lewin-Solomons, 1999) and communication. Dane (1992), Dandridge and Falbe (1994) and Lewin-Solomons (1999) emphasize the importance of advisory councils as tools to communicate between franchisees and the franchisor. This benefits both sides, since franchisors largely depend on franchisees feedback and creativity as well as franchisees easily can share their thoughts and opinions. After a thorough research of the relevant literature, the authors learned that a number of researchers identified the scarcity of research about the role of the franchisee in the innovation process (Dandridge, 1998; Sundbo, 2010). Dandridge (1998) looked at how organizational variables in franchising such as size, age and growth affected the support of franchisor for franchisee innovation.

Self-Service Technologies

In 1978, Chase (1978) discussed that service companies should try to make their operations as efficient as possible. This can be made by shifting operations that require customer-employee interaction to the back-office if the customer-employee interaction is not critical to the company. With the help of technology, customers basically replace employees and produce services themselves (Natarajan, 2010). By using self-service delivery options, the company which implements the technology will obtain benefits such as increased productivity and decreased costs (Lovelock, C.H. and R.F. Young, 1979) (Sathye, 1999) (Kelley, 1994). For example, IBM saved US $2 billion when they shifted telephone call service to online service provision (Burrows 2001).

Innovation

Schumpeter (1934) defined innovation as the act of infusing a new component or a mix of components into production. An innovation can be either radical or incremental. According to Sundbo, (2010) incremental innovation is adaptation of existing products or a new way of delivering products. These types of innovations are the most common ones in franchisees. Since franchisees as well as company-owned outlets have specific instructions from the headquarters on how they should conduct business, which constrains them to implement radical innovations on their own. Deviations from this instruction can have unpleasing consequences, for example, termination of a franchisee contract. Gallouj (1994) mentioned different types of innovations: (1) Service product: which results in innovation of new element, (2) Architectural: Same elements mixed in another way, (3) Modification: Some elements are adjusted, (4) Ad hoc: Results in a development of a new solution.

Arguments for selecting a case study approach

According to Yin (2003) three conditions should be taken into consideration when choosing a research strategy: 1) the type of a research question, 2) the degree of control the author has over the study units and 3) research focus on contemporary as opposed to historical phenomena (Yin, 2003). The authors have chosen a case study because this study looks more at operational links of the phenomenon rather than incidence or prevalence of the phenomenon. It also emphasizes on explaining how organizational structure affects the innovation process. According to Yin (2003) “how” and “why” questions are more exploratory and lead towards case studies, experiments and histories. According to Baxter and Jack (2008) case study is by far the best method to address the context issue.

Selection of study units

In statistical sampling, “bias” is considered a weakness and should be avoided. However, this approach is considered as strength in a qualitative research. The idea behind “biased sampling” or so called “purposeful sampling” is to select information-rich cases from which authors can learn about issues which are of great importance when answering research questions (Patton, 2002) The most important thing when selecting cases was to find companies that had very different proportions of franchisee and company-owned establishments in their organization. It was also not feasible to include all restaurants in this research due to lack of time. Therefore, the authors choose to use purposeful sampling to represent two typical organizational structures that comprise fast food companies: franchise and companyowned outlets.

Table of Contents :

• 1 Introduction/Background
  • 1.1 Problem Statement
    • 1.1.1 Franchisees
    • 1.1.2 Company owned outlets
  • 1.2 Purpose
  • 1.3 Research questions
  • 1.4 Delimitations
• 2 Theoretical Framework
  • 2.1 Self-Service Technologies
    • 2.1.1 Franchising
    • 2.1.2 Innovation
    • 2.1.3 Innovation in a franchise setting
    • 2.1.4 Franchisee vs. Company-owned outlets
    • 2.1.5 Communication
    • 2.1.6 Experience of a franchisee
  • 2.2 Summary of the findings
  • 2.3 Concept Development
    • 2.3.1 Roger’s diffusion of innovation

• 3 Method
  • 3.1 Arguments for selecting a case study approach
  • 3.2 Pilot study
  • 3.3 Case selection
    • 3.3.1 Location of Research
      • 3.3.1.1 Subway
      • 3.3.1.2 Max
    • 3.3.2 Selection of study units
  • 3.4 Data Collection
    • 3.4.1 Language of the interview
    • 3.4.2 Interview Techniques
    • 3.4.3 Interview guide
  • 3.5 Data analysis
    • 3.5.1 Inductive vs. Deductive approach
    • 3.5.2 Cross case analysis
  • 3.6 Trustworthiness
    • 3.6.1 Credibility
    • 3.6.2 Transferability
    • 3.6.3 Dependability
    • 3.6.4 Confirmability
  • 3.7 Interpretation of the data
• 4 Results
  • 4.1 Current relationship with SST’s
    • 4.1.1 Max
    • 4.1.2 Subway
  • 4.2 Comparison with competitors
    • 4.2.1 Max
    • 4.2.2 Subway
  • 4.3 Communication
    • 4.3.1 Max
    • 4.3.2 Subway
  • 4.4 Innovation, changes and power distribution
    • 4.4.1 Max
    • 4.4.2 Subway
• 5 Analysis
  • 5.1 Max
    • 5.1.1 Communication
    • 5.1.2 Power
    • 5.1.3 Roger´s diffusion of Innovation, at Max
    • 5.1.4 Examination of previous research
  • 5.2 Subway
    • 5.2.1 Communication
    • 5.2.2 Rogers Diffusion of Innovation applied on Subway
    • 5.2.3 Examination of previous research
    • 5.2.4 The three Processes of Innovation within Subway
    • 5.2.5 Individual Entrepreneurship
    • 5.2.6 Control over franchisees
• 6 Conclusion
• 7 Discussion
  • 7.1 Suggestions for further research
  • References

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Innovation within Fast Food Restaurants-The role of the local restaurant management